DeFi tools essentially replicate classic investment mechanics within the cryptocurrency market, including but not limited to:
- decentralized lending;
- trading of cryptocurrency analogs of derivatives and futures contracts, AKA synthetic assets;
- trading cryptocurrency assets with leverage;
- passive income from cryptocurrency deposits.
The activity of DeFi services is provided by users’ funds locked in the accounts of these services with the help of smart contracts, denoted as TVL (Total Value Locked). The vast majority of DeFi services are based on the Ethereum blockchain. The TVL of DeFi services based on Ethereum is approximately $81 billion. Other blockchains used for DeFi include Binance Smart Chain blockchain (about $21 billion), Solana (about $11.5 billion), Terra (about $8,3 billion), Polygon (about $6.7 billion), and others (about $3 billion), but none come close to Ethereum’s dominance.
As we discuss potential investments in the DeFi space, it is important to note that all data referenced is taken from The Block as of September 15, 2021. Given the high volatility of the cryptocurrency market, it is important to update yourself with the developments in the market since that time.
The Best DeFi Tokens to Invest In
It is important to note that the following content in “Top DeFi tokens to invest in” is an opinion formed upon the basis of dozens of expert interviews, the latest news, and common sense. It is not “insider information,” nor is it a call to invest all your money into specific projects. Rather it is a guide to the state of the DeFi market to help you make your own informed decisions.
All information on prices below is given according to CoinMarketCap.
MakerDAO (MKR)
Main DeFi token: MKR.
Token value dynamics: $24.30 at the start (31.01.17), $6,012 at the peak (03.05.21), $2,982 at the time of writing (15.09.2021).
The MakerDAO decentralized lending protocol is one of the most well-known DeFi projects. It has a wide range of functionality, but its main service is DAI tokens, a decentralized stablecoin. More than half of all blocked ETH accounts provide the collateral debt on which DAI is supplied, and the rest of the MakerDAO services work. Maker (MKR) is a token of MakerDAO and Maker Protocol, which are the project’s decentralized organization and software platform, respectively. The token has an ERC-20 standard.
Compound (COMP)
Main DeFi token: COMP.
Token value dynamics: $64.60 at the start (17.06.20), $854 at the peak (11.05.21), $444 at the time of writing (15.09.2021).
This DeFi service allows you to borrow and lend cryptocurrency at interest. The rate of return is determined algorithmically, depending on the current supply and demand for a particular cryptocurrency. COMP is an ERC-20 standard token used to control the decentralized Compound protocol.
Augur (REP)
Main DeFi token: REP.
Token value dynamics: $1.30 at the start (28.10.15), $108 at the peak (19.12.17), $26 at the time of writing (15.09.2021).
A decentralized event prediction platform built on the Ethereum blockchain. REPs are “reputation tokens”; their owners can bet on the outcome of a particular event.
Enzyme Finance (MLN)
Main DeFi token: MLN.
Token value dynamics: $29 at the start (23.02.17), $256 at the peak (04.01.18), $126 at the time of writing (15.09.2021).
A decentralized, open-source protocol based on Ethereum that provides a toolkit for creating digital asset funds management. The service was initially called Melon but changed its name when it was reorganized in 2019 to become fully decentralized. The MLN token serves as a means of internal settlement and commission payment for users of the Enzyme Finance services.
ChainLink (LINK)
Main DeFi token: LINK.
Token value dynamics: $0.17 at the start (09.05.21), $52 at the peak (04.01.18), $30 at the time of writing (15.09.2021).
A decentralized platform for managing smart contracts with external oracles. The network is designed to facilitate the transfer of tamper-proof data from sources outside the network to smart contracts inside the network. The platform is based on the Ethereum blockchain.
Aave (AAVE)
Main DeFi token: AAVE.
Token value dynamics: $54.50 at the start (10.04.20), $651 at the peak (18.05.21), $403 at the time of writing (15.09.2021).
A peer-to-peer lending platform based on Ethereum. Aave was originally called ETHLend and had a LAND token. In early 2021, the platform was transformed into a service with decentralized liquidity, and the source code for the project was opened to the public. AAVE token holders have corporate governance rights and receive a daily share of commissions from the platform.
Republic Protocol (REN)
Main DeFi token: REN.
Token value dynamics: $0.08 at the start (23.02.18), $1.72 at the peak (19.02.21), $1.07 at the time of writing (15.09.2021).
Republic Protocol is a decentralized, open-source exchange protocol for OTC trading. The platform executes cross-chain transactions via atomic swaps, allowing transaction participants to remain anonymous. REN tokens are the main economic incentive for network participants and a means of commission payment within the network.
Kava.io (KAVA)
Main DeFi token: KAVA.
Token value dynamics: $0.96 at launch (26.10.19), $8.71 at peak (23.10.21), $1.07 at the time of writing (15.09.2021).
An inter-network lending platform that allows users to use a variety of cryptocurrencies, including USDX, a stablecoin pegged to the U.S. dollar, as well as synthetic and derivative financial instruments. KAVA is a token for staking and management.
What Do Experts Say?
This list of the DeFi tokens for investment is far from complete. Moreover, the cryptocurrency market continues to be very dynamic, so it is crucial to understand the basis of any crypto project’s growth and development. Of interest are those DeFi projects that offer a real product that fulfills a demand on the market. Projects with good potential arise around a team that can create reliable and practical technical solutions, secure favorable media coverage, attract investment and work with the user community. Taking into account all these factors makes it possible to predict the development of a project and the growth of its token value.
The following information is based on interviews with practicing investors, tech experts, and our business partners for their opinions on potentially interesting DeFi tokens for long-term investments.
Rast Pentagon, Fund Fakel CEO
I would highlight GameFi tokens, which form the economy in certain games and serve as settlement currencies (like AXS tokens). However, I would not recommend buying DeFi tokens for more than 1% of your deposit. The second project is Solana (SOL), known as “modern ETN,” with its potential of up to $800-900. But again, I would recommend not to forget about risk management. Don’t put all your money into one project, otherwise buying any crypto could lead you to bankruptcy.
Vince Pellizzari, CoinsPaid Trader
Interesting question! Right now, a couple of DeFi coins come to mind. Most of them have huge potential in my opinion, like Annex, for example, which is a crypto lending and borrowing dApp. We all know that banking is all about lending and borrowing; so if Annex keeps developing it could easily become one of the first DeFi banking institutions, keep an eye on it.
The other is one that I’m impatiently waiting for, as it is not yet launched. The dApp already exists and not only looks great but offers amazing features to monitor a portfolio of cryptos based on the Solana environment. it will also allow the creation of portfolios and index funds in a near future. The dApp in question is named Symmetry and the corresponding coin will probably be called SMF according to its official Twitter account. The last feature I mentioned is pretty huge as it will allow the disruption of an 11 trillion dollar industry, by which I mean the ETFs market. People will be able to invest into others’ investment portfolios in a decentralized fashion, no more hidden costs, and above all no more cheating on the performance disclosure, like what happened during the Madoff scandal, as everything will be fully transparent.
Ivan Kibalchich, Yosu CEO
Top DeFi projects like Copm, Aave, Synthetix still have great growth potential, as the DeFi market is in its infancy. Of the new projects, I would single out Inst, which has not yet launched its tokens on the market and is clearly underestimated.
